How to buy a house in the USA?

Discussion in 'Archived Threads 2001-2004' started by BrianB, Mar 12, 2002.

  1. BrianB

    BrianB Producer

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    My wife & I are contemplating buying a house north of the Metroplex. This is new to us. We're still at the stage of weighing up the pros/cons financially & lifestyle wise, and are going to talk to our credit union this week about it. This is all new to us... I've soaked up a relatively good amount of info from friends & from the 'net, but I need more, more, more. Does anyone have any reccomendations on books or sites for this process?

    One thing I'm curious about - if we get approved for a mortgage & don't chose to use it at this time, is that any kind of a 'black mark' on our credit history?

    Any pitfalls we should know about? At this stage, we're likely to pick up a 'used' house rather than a newly constructed one. What's the pros/cons to that?
     
  2. Scott Merryfield

    Scott Merryfield Executive Producer
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    The advantages of a "used" home are (1) you can usually get more home for your money and (2) all the bugs should be worked out of the house by previous owners. The disadvantages are that (1) big ticket replacement items such as roofs, furnaces, etc. are older and closer to needing replaced or repaired, and (2) you are pretty much stuck with the layout of the home unless you want to undertake major renovations (cosmetic items such as painting and carpeting can easily be changed for a relatively minor cost, though).

    With new home construction you can customize the home more to your needs and tastes. The downside is that every customization is an extra cost, plus you need to factor in other costs such as landscaping, building a deck, finishing a basement, installing a sprinkler system, etc. that you may be able to find already completed in a used home. Finally, you need a lot of patience if you build a new home. I have yet to meet anyone whose construction went smoothly. Expect problems and delays -- they are the rule instead of the exception.

    In any case, owning a home has numerous advantages over renting. (1) Your home is an investment that should appreciate in value over the years. (2) There are a lot of tax advantages to home ownership. (3) Unless you purchase a home in a development with a restrictive home owners association, you can modify the home to meet your changing needs. (4) When you rent, you get nothing for your monthly rental fee except a roof over your head and someone to maintain the property. None of the rent is tax deductible, and you will never realize an investment gain with any of the money you pay.

    Good luck in your search for a home.
     
  3. Kelley_B

    Kelley_B Cinematographer

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    I just went through the same thing you are going to go through, and I actually decided NOT to get a house at this present time, why? Because *I* was not ready to take on all the responsibility that comes with owning your own home, cutting the grass, fixing anything that goes wrong, etc., etc....So let me give you some advice:

    Check your credit now, yes now, do not wait until you go in there and they start pulling up stuff that you never heard of. Its best to know whats on there and try to fix whats on there before you go in. Every mortgage person I spoke to said if you had a 600 or above credit rating you are good to go.

    Also bring with you your last two W-2s, last three if you got them.

    Call your phone company, electric, cable, credit, etc. and try to get reference letters from them and bring those with you, they can help smooth over bumps on your credit report.

    Be prepared for a long and hard journey, but many feel its worth it....I think it will be worth it, especially with you being married, the tax write off will be great.

    Are you planning on doing an FHA loan?

    I personally plan on saving up more money and will try to get a house again about this time next year.

    Good Luck Brian
     
  4. BrianB

    BrianB Producer

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  5. BrianB

    BrianB Producer

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    Absolutely no idea on the FHA loan by the way. A friend just bought his house with one. What's the pros/cons? What's the qualification?
     
  6. Jeff Ulmer

    Jeff Ulmer Producer

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    While owning youor own home does have its disadvantages in maintenance and responsibilities, the benefits far outweigh them, assuming you aren't the type who wants to pack up and move every few months.

    The only way applying for a mortgage could hurt your credit is if you get turned down, in which case you then can't say you were never denied a loan. The times I've dealt with a bank on this kind of thing, they will usually tell you up front whether you stand a chance of being declined. Also, how much of a mortgage you qualify for will change with your financial situation, as your debt ratio is based on your income for the past three years.

    I would advise a used house as your first for a number of reasons, primary being figuring out what you do and don't need by actually living in a house. Building is expensive (always higher than you anticipated), frustrating and has ended many a relationship. If you are not sure exactly what you want you are in for a nightmare. A used house gets you into the market, builds your equity, and should you decide to build later, gives you an opportunity to find out what your housing needs are.

    I would also advise NOT buying a house that is at the extreme of your mortgage preapproval. While interest rates make home buying attractive now, you could be forced to sell in a poor market if the rates go up and push your payments beyond your means. Since it will probably be your biggest asset, make sure the neighborhood warrants the price you're paying, and check out the tax assessments over the past several years to see what property values have been doing in that area.

    There are lots of things to pay attention too, but I would concentrate on finding someplace you can afford to live comfortably from a financial standpoint (factoring in taxes, hydro etc), and one that suits your lifestyle.

    Good luck!
     
  7. Andy_S

    Andy_S Second Unit

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  8. SteveA

    SteveA Supporting Actor

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    Applying for a mortgage - or any other loan for that matter - CAN harm your chances for getting a loan later, regardless of whether you're turned down or not. Every inquiry into your credit shaves a few points off your FICO score. Lenders assume that someone who is applying for a bunch of loans must be in trouble financially.

    An inquiry here or there won't hurt you too much, but definitely keep in mind that every time someone checks your credit, your score is lowered a little bit more.
     
  9. MickeS

    MickeS Producer

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    We used an FHA loan for the reason Andy states: we didn't have money for a decent downpayment on a regular loan. If you do, I don't see a reason to go with FHA.
    if the choice is between FHA and renting (as it was for us), I'd say go with FHA. It's a very nice feeling owning your own home. [​IMG]
    Used or new? We chose new because the older homes in the area we were looking in cost more than a new home in area slightly further away, and because we didn't want to get a "fixer upper", even if it meant just putting in new carpet.
    We pretty much stuck to whatever the standard equipment was for the house, with some exceptions. Even then, there were some problems. I can't imagine what a nightmare it must be to have a custom home built...
    but then again, I'm sure it feels good when it's all over.
    All in all, I would suggest that you first check out how much house you can afford, so you know what to look for, and then decide if you want new or old.
    Good luck.
     
  10. Scott Merryfield

    Scott Merryfield Executive Producer
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    As long as you do not purchase a home at the extreme end of your financial means, there are ways to reduce the amount of maintenance you must perform. Lawn care services are not that expensive (a lot less than the monthy maintenance fees in most condo associations). In our area, the going rate is $18 per cut. I have not cut our lawn in many years, but I still do the other yard work (trimming the bushes/trees, fertilizing). A home with a sprinkler system saves time in watering the lawn -- we installed one a few years ago. Homes with brick exteriors and vinyl/aluminum covered trim greatly reduce exterior maintenance time.

    While you probably will not want to (or be able to afford) pay others to do everything for you, there are instances when hiring someone to do the work can save time and be worth the expense. We do most of our own interior painting, but there was one area that was going to be too difficult for me to manage alone (the two-story entry, staircase and hallway). We paid a professional to repaint that area, and it was well worth the added cost.
     
  11. BrianB

    BrianB Producer

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    Do you get FHA loans through the same 'regular' loan providers? I mean, will our credit union offer them or do we go through some government agency?

    That's likely to be the type of loan to suit our current sitatuion. I definitely do NOT want to 'max' our mortgage capability - the instability of the economy of the past 12 months shows what a bad idea this is. It's also why we're considering buying a house though... There's a good number of houses for sale in our local town, bought by people in the telecom 'boom' & now having to move on. But that's by the by.

    Thanks for the advice, guys. I checked our credit online as suggested, and there's no nasty suprises waiting for us. My history is basically non-existant though.

    So, if we get a strong pre-approval from our credit union, what's next? Just look, look, look? Sign up wtih one particular estate agent?
     
  12. Alex Giese

    Alex Giese Extra

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    Here is a website that I like to go to for financial information especially mortgages, home equity, etc.
    www.bankrate.com
    This site may answer several of your questions.
    As for looking for an agent, ask your family, relatives, or friends for any recommendations.
    To look for homes, you could start by searching using the term MLS and whatever city you are looking in with a search engine. You will get a good idea how much homes are going for in specific areas.
     
  13. Kelley_B

    Kelley_B Cinematographer

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    I would take the visit down to your credit union and if you get approved then start looking, no use in getting your hopes up for nothing. Like I said earlier if your credit scores are above 600 you are pretty much good to go!
     
  14. BrianB

    BrianB Producer

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  15. RobR

    RobR Second Unit

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    My wife and I are also in the process of purchasing our first home.

    Contact a realtor, who will refer you to an agent (or relocation director, as they seem to call them nowadays). You need not remain with that agent if you don't like him or her and you have the option of getting a different agent. As far as I know, you do not pay for their services (the seller pays for them).

    Be prepared for a large closing cost in addition to the loans, which could be up to $6,000 for a $300,000 home.

    If you want to reduce maintenance on a house, you could get a townhouse (especially if you intend it to be a stater home and plan to relocate later). Major repairs to the exterior of the building would be covered by HOA (Home Owner Association).

    Good luck.
     
  16. MickeS

    MickeS Producer

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    Brian, yes, if you are interested in an FHA loan, ask your lender about it and they should take care of it for you.
    There is a limit on the mortgage amount though, and it varies depending on where you live. Right now in Dallas County, the limit is $161,405, so if you want an FHA loan, the loan has to be less or equal to that. The number is adjusted every once in a while though, so it might go up when you finally decide to buy.
    https://entp.hud.gov/idapp/html/hicostlook.cfm
    There are other ways to get a loan with little down payment too, but they usually seem to involve getting second mortgages and stuff. I don't know anything about that.
    Rob points out the closing costs, which you have to remember. Our home cost "only" $138,000 (a huge chunk of money for me though [​IMG]), but the closing costs ended up around $3500, plus the down payment of around $3000. So we had to pay upfront around $6500. I still have no clue how we did that. [​IMG]
    /Mike
     
  17. Jeff Ulmer

    Jeff Ulmer Producer

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  18. Philip Hamm

    Philip Hamm Lead Actor

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  19. Scott Merryfield

    Scott Merryfield Executive Producer
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  20. MickeS

    MickeS Producer

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    Scott has a good point about HOA and the rules.
    Our HOA has a bunch of rules, and I agree with about 95% of them, and the ones I don't agree with, well, I break them and noone will ever know. [​IMG]
    Some people like rules (I do! [​IMG]), and some get rashes just reading them (some people seem to get it even if they'd never apply to their situation).
    Like, we can't park RV's or boats on the street outside our house for an extended period of time, we can't dramatically alter the outside appearance of our home, we can't put up a permanent basketball hoop in the driveway and so on. I'll never do those things anyway, so I'm just happy there won't be some guy living in an RV outside the neighbor's house, that they won't paint their house pink and that I won't hear the constant thump-thump-thump from basketballs... Yeah, I'm a little fascist! [​IMG]
    But be sure to check out the rules before you move in.
    /Mike
     

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